`Avatar' is such a smash it's lifting News Corp

FILE - In this file film publicity image released by 20th Century Fox, the character Neytiri, voiced by Zoe Saldana, right, and the character Jake, voiced by Sam Worthington are shown in a scene from, "Avatar." Blue-skinned aliens are helping Rupert Murdoch's News Corp. see green, yet they won't prevent the company's future movies from sometimes dipping into the red.(AP Photo/20th Century Fox, File) NO SALES
— AP

FILE - In this file film publicity image released by 20th Century Fox, the character Neytiri, voiced by Zoe Saldana, right, and the character Jake, voiced by Sam Worthington are shown in a scene from, "Avatar." Blue-skinned aliens are helping Rupert Murdoch's News Corp. see green, yet they won't prevent the company's future movies from sometimes dipping into the red.(AP Photo/20th Century Fox, File) NO SALES
/ AP

"I have to keep pinching myself," said James Clayton, chief executive of London-based Ingenious Media Investments, which put investors' and its own money into the movie and will share in the bounty. "For one director to be responsible for the No. 1 and No. 2 highest-grossing movies of all time is quite something."

Clayton said investors expect to get their financial statement on "Avatar" in about six months.

Movie economics are murky, and Fox and Clayton declined to comment on the specifics of their deals. Factors affecting the ultimate bottom line include profit-sharing deals with the creative talent, including Lightstorm Entertainment, the production company owned by Cameron.

But combined with the better-than-expected success of "Alvin and the Chipmunks: The Squeakquel," "Avatar" is expected to help News Corp.'s film division make $1.26 billion in operating profit in the fiscal year ending in June - about $160 million more than initially thought, according to Creutz.

That would mean the film division would have about a third of News Corp.'s operating profits for the full year. Generally it produces about one-fourth.

The ride isn't over, either.

"There's still a question of: How long is this thing going to go?" Creutz said.

He noted that "Avatar" has shown even better staying power in theaters than "Titanic," which went on to gross $1.8 billion worldwide, and is still the most successful film ever.

The outsized benefits, however, can be undone by studio missteps down the road.

It's difficult for movie executives to predict a home run, and for every movie that succeeds wildly, there are several that flop, including "Babylon A.D.," a widely panned sci-fi thriller starring Vin Diesel that Fox released last year.

The company still has to contend with the piracy of its movies, the threat of cheap rentals, the high cost of production and the decline of DVD sales. Those challenges are bigger than a whole race of 10-foot-tall Na'vi.

Precisely because hit movies are tough to foresee, Wall Street tends not to rely on them to evaluate media companies, and "Avatar" isn't likely to change that. Movie profits have also been declining industrywide as the parent companies have cut costs and reduced the number of movies released, making the studios a smaller part of their companies' future value.

Investors are now focused more on the companies' steady-earning cable TV channels whose fortunes are hitched partly to reliable and rising cable TV bills.

"Filmmaking remains a hit-or-miss business," Anthony DiClemente, an analyst with Barclays Capital, wrote in a research note.

In fact, the movie's success may have done more for theater companies than for News Corp. itself. It served as a reminder that theater chains such as Regal Entertainment Group and Cinemark Holdings Inc. remain relevant, despite the rise in home entertainment, as living rooms still cannot match the theatrical experience in 3-D viewing. Since "Avatar" opened, both companies' shares have risen more than 5 percent.